Key findings:
- Small business confidence has reached its highest levels since 2018 after Trump’s election
- Economic optimism and inflation sentiment reaches new highs after Trump’s election
- Fewer small business owners are reaping benefits from lower interest rates than expected.
- Hiring and investment fall short of expected increases from interest rate cuts, while small business owners follow through on increased inventory and increasing wages
- Tariffs raise new concerns among small business owners, but worries are split along party lines
Economic optimism and inflation sentiment reaches new highs after Trump’s election
One in three small business owners (32%) view the economy as ‘excellent’ or ‘good’, up 5 percentage points from the previous quarter (27%), and highest since this sentiment has started tracking in Q2 of 2022. Confidence in inflation’s retreat is also at its highest, with 40% of small business owners feeling that inflation has reached a peak, up from 33% the previous quarter, and twice as high as the 20% from Q4 of 2022.
Confidence in the Fed’s ability to control inflation also reaches new highs: nearly half (45%) of small business owners are ‘very or somewhat confident’ in the Fed’s ability to control inflation, up 11 percentage points from the previous quarter (34%).
While inflation remains the leading threat to small business owners, only 28% cite inflation as their largest risk, down from 38% the previous quarter.
Fewer small business owners are reaping benefits from lower interest rates than expected.
While three in five (62%) of small business owners expected some degree of impact on the business from interest rate cuts in the previous quarter, only half (50%) now say that the interest rate cuts have had an impact on their business. 48% say they have had no particular impact, compared to 36% of owners the previous quarter.
Small business owners are also made fewer than expected investments on their businesses:
- 27% currently say that have increased investments in their business, down from the 40% who planned on increasing investments in Q3 due to expected interest rate cuts
- 20% have expanded their business, compared to 37% who expected to do so the previous quarter
- 23% have increased inventory, on par with the 26% who expected to do so the previous quarter, and one in five increased employee wages or benefits (21%), on par with the percentage who expected to do so from the previous quarter (20%)
- Only 11% have hired more employees, lower than the 17% who expected to do so in Q3
Economic growth and inflation were the top issues when it came to who to vote for in the election, with 55% citing either issue as their determining factor. Social issues also played a larger part than previously expected, with 46% voting for a specific candidate due to social issues, compared to 41% who said this would factor into their voting decisions, as polled the previous quarter.
Tariffs raise new concerns among small business owners, but worries are split along party lines
Four in ten (42%) small business owners expect president-elect Donald Trump’s proposed tariffs to impact their business, compared with 33% who expect no impact, and 24% who are not sure. Republican business owners are more likely than Democrats to think that tariffs will not impact them (48% vs. 16%). Two in three (64%) Democrats think tariffs will affect their business, compared to just 31% of Republicans, and 37% of Independents.
Concerns about tarriffs are also split along party lines: 54% of small businesses overall are ‘not at all concerned’ or ‘not too concerned’, while 46% are ‘very or somewhat concerned’.
- 76% of Republican business owners show little to no concern about the proposed tariffs, compared to 22% of Democrats. Conversely, 78% of Democrat business owners are ‘very or somewhat concerned’, compared to only 24% of Republican business owners.
Only one in four (23%) small business owners are taking preemptive action ahead of the proposed tariffs, with more than half not expecting to take any action (56%), and one in five unsure (20%).
Small business confidence reaches its highest levels since 2018 after news of Trump’s election
Small Business Confidence climbs to 62 out of 100, up 11 points from 51 in Q2 of 2024, and 16 points higher than Q4 of last year (at 46).
This increase is mainly driven by positive expectations across nearly all areas:
- Changes in expected business revenue (from 52% increase in Q3 to 63% in Q4)
- Changes in expected hiring (from 24% increase in Q3 to 36% in Q4)
- Changes in government regulation (from 18% positive in Q3 to 43% in Q4)
- Changes in tax policy (from 20% positive in Q3 to 42% in Q4)
- Changes in trade policy (from 14% positive in Q3 to 33% in Q4)
- Changes in immigration policy (from 14% positive in Q3 to 35% in Q4)
Small business owners who identify as Democrat are the lone group to see declines in business sentiment, from 62 in the previous quarter, to 50 in Q4. This decline was not enough to offset the massive jump in sentiment among Republican business owners, from 43 points in Q3 to 71 points in Q4. Independents see a small bump, from 51 points in Q3 to 57 points in Q4.
Confidence in President Biden sees no change from the previous quarter, with 38% approving and 61% disapproving of the way Joe Biden is handling his job as president.
Small Business Confidence among Biden’s supporters declines 8 points quarter over quarter, from 62 to 54. Confidence among detractors of Biden’s performance continues to increase, up 23 points from the previous quarter to 67 currently.
Confidence increases across among Republican and Independent business owners:
- Confidence among Republican business owners increases 28 points quarter over quarter, from 42 to 71.
- Confidence among Independent business owners increases 6 points quarter over quarter, from 51 to 57.
- Confidence among Democrat business owners declines 12 points quarter over quarter, from 62 to 50.
Black business owners are the sole racial group whose confidence has declined, down one point to 62 from 63 the previous quarter. White, Hispanic, and small business owners all see double-digit increases (+12, +10, and +10, respectively).
Weighting
Data for small business statistics have been weighted according to business characteristics (industry and number of employees) according to the Small Business Administration’s 2013 Statistics of U.S. Businesses. Additionally, person-level data (age, gender, level of education, race, geography) for business owners have been weighted to the Census Bureau’s 2012 Survey of Business Owners.
Data for questions asked of the general population have been weighted for age, race, sex, education, and geography using the Census Bureau’s American Community Survey to reflect the demographic composition of the United States age 18 and over.
Index calculation
The final small business confidence index (SBCI) is calculated according to the following formula:
Where A, B, C, D, E, F, G, H are responses to the following
questions, with values of 2 assigned to positive responses (Good, Increase, Positive effect), 1 assigned to middle values (Middling, Stay the same, No effect), and 0 assigned to negative values (Bad, Decrease, Negative effect).
A = Overall, would you describe current conditions for your business as good, middling or bad?
Good
Middling
Bad
B = In the next 12 months, do you expect your business’s revenue to increase, stay the same, or decrease?
Increase
Stay the same
Decrease
C = In the next 12 months, do you expect your business’s staff of full-time employees to increase, stay the same, or decrease?
Increase
Stay the same
Decrease
D = In the next 12 months, do you expect changes in government regulations to have a negative effect, no effect, or a positive effect on your business?
Negative effect
No effect
Positive effect
E = In the next 12 months, do you expect changes in tax policy to have a negative effect, no effect, or a positive effect on your business?
Negative effect
No effect
Positive effect
F = In the next 12 months, do you expect changes in trade policy to have a negative effect, no effect, or a positive effect on your business?
Negative effect
No effect
Positive effect
G = In the next 12 months, do you expect changes in technological innovation to have a negative effect, no effect, or a positive effect on your business?
Negative effect
No effect
Positive effect
H = In the next 12 months, do you expect changes in immigration policy to have a negative effect, no effect, or a positive effect on your business?
Negative effect
No effect
Positive effect
This quarter, less than 2% of respondents skipped one or more of the index questions A-H. In order to calculate an index, we impute these missing values by assigning them to the middle value for each question. These imputed values are only used for index calculation, not in any crosstabs or in the full banners.
